The National Association of State Boards of Public Accountancy recently released a draft of proposed changes to Rules 5-1 and 5-2 of the Uniform Accountancy Act (i.e., the 150-hour requirement).

The proposed changes are available on the NASBA Web site, under "Publications and speeches." In the comments section of the exposure draft, NASBA justified the amendments as providing a better foundation in communication, research, judgment, analysis and ethics.

Proposed UAA rules

The number of hours required to sit for the CPA Exam does not change from the current 150-hour requirement under the exposure draft. However, the content of those hours is specified in much more detail. The proposal requires a minimum of 60 semester credit hours of general education. In addition, it increases the quantity and specificity of course coverage for both accounting and business.

The applicant's educational program must include at least 30 credit hours of accounting at the upper-division undergraduate level (the previous level was 24), or an equivalent of graduate hours or an equivalent combination of graduate and undergraduate hours. These 30 required hours include the following detailed requirements:

* Six credit hours of financial accounting and reporting for business organizations, from three hours;

* Two credit hours of financial accounting and reporting for government and not-for- profit entities, a new requirement;

* Three credit hours of assurance services (e.g., auditing and attestation);

* Three credit hours of taxation;

* Three credit hours of management accounting;

* Three credit hours of accounting information systems (a new requirement); and,

* Three credit hours of the ethical and professional responsibilities of CPAs (also a new requirement).

In addition, communications and research and analysis in accounting are required to receive three credit hours each. The proposed law suggests that these hours should be integrated throughout the accounting curriculum. However, proof that cumulative coverage meets these minimums is required.

The applicant's educational program must include at least 36 credit hours of business at the upper-division undergraduate level (previously 30 credit hours), an equivalent of graduate hours, or an equivalent combination of graduate and undergraduate hours. These 36 required hours include the following detailed requirements:

* Three credit hours of business law;

* Six credit hours of economics (upper- and/or lower-division level);

* Three credit hours of quantitative methods and analysis;

* Three credit hours of principles of management and/or organizational behavior;

* Three credit hours of strategic management;

* Three credit hours of finance and financial management;

* Three credit hours of information technology (upper- and/or lower-division level);

* Three credit hours of marketing; and,

* Three credit hours of ethical foundations and applications in business.

In addition, communications, research and analysis in business must each receive three hours of coverage. The proposed law suggests that these should be integrated throughout the business curriculum.

The proposed rule limits credit for internships and independent study. Six credit hours for internships may be counted. However, only three credit hours may be applied to accounting. Three credit hours of independent study may be counted toward the accounting and/or business subject matter requirements.

Problems with the proposals

While NASBA's goal of improving the skills of accountants is laudable, the impact of the proposed standards is potentially devastating to the profession.

In the comments attached to the exposure draft, NASBA justified the amendments to the Uniform Accountancy Act as necessary "due to globalization, technological innovation and other fast-paced changes." However, the proposed changes to the UAA would slow the reaction of the profession and academe to these forces. In addition, the changes may be costly or impossible to implement.

The predominant business and accrediting body, the American Association of Collegiate Schools of Business, has moved away from highly prescriptive approaches to curriculum and accreditation. The AACSB encourages designing the curriculum to be responsive to the demands of each university's constituency, both students and the business community. The needs of these groups may vary from institution to institution. Accordingly, the AACSB encourages entrepreneurship and constant innovation and improvement in the curriculum. Once any course requirement is adopted into law, that law must be amended before new, innovative courses can replace old, stale, mandated courses.

By prescribing individual courses and their content, the proposed UAA will stifle entrepreneurship, innovation and constant improvement. Over time, the relevance and quality of accounting education will be compromised due to the lack of flexibility and innovation.

Requiring some courses may add little to the educational experience due to how the courses are structured at individual universities. There is frequently a high degree of overlap in many courses. For example, at some universities 90 percent of the information content in MIS is duplicated in AIS. In essence, AIS is a superset of MIS. Accounting students may not gain much from the MIS course except for an easy 'A.' By design, some courses may have little content or may not have the content that the proposed standards envision. The proposal does not allow flexibility to deal with these issues.

At many institutions, courses cannot be established easily. New courses must go through a formal approval process that requires the consent of college and university committees.

Accounting cannot require the college of business to establish a research course, an ethics course or any other course. That decision has to be made by the college, and is subject to the college approval process. The same is especially true about courses outside the college of business. In the current era of budget cuts at universities, getting approval for new courses is often problematic.

Business colleges and universities already perceive accounting as having too many required courses. Accounting has one of the highest number of required courses of any major. Other departments are reluctant to approve additions to the required number of courses. If a required course is to be added, another must be dropped.

Instead of adding hours to the curriculum, the profession might be better served by eliminating current requirements that do not add greatly to the professional's education. An example of a course that might be considered for dropping is quantitative methods and analysis. The exposure draft presents the following suggested content for that course:

* Quantitative methods: linear programming, simplex method, transportation method, post-optimality analysis, game theory, utility theory, PERT-CPM, queuing theory, dynamics programming, Markov chains, decision-tree analysis, time series analysis and forecasting, regression analysis, data mining and neural networks;

* Quantitative analysis: review of decision theory in terms of identification, analysis and application, including in-depth analysis concerning decision models, quantitative methods used in operations research, management science, and systems analysis.

After reading the exposure draft, a retired colleague commented on this requirement, "That used to be in vogue, but I thought it had been eliminated."

Practitioners should ask themselves how often they utilize these methods in their daily practice. Do we need to include courses in the curriculum that are not value-adders? This demonstrates the difficulty of removing courses from the requirements to sit for the CPA Examination once they have been formalized into legal requirements. This problem will be exacerbated should the exposure draft be adopted.

Accounting students have no flexibility in their schedules. This proposal would remove the two or three courses of flexibility that they do have. If a student does not initially plan to go into accounting, it is very difficult to enter the program without adding to the number of years spent at the university.

Further, the proposed standards may add more hours to the required curriculum. Colleges and universities have their own required courses, which they will continue to require even if the proposed standards are adopted. Therefore, the new course requirements will be added to the existing requirements. Due to the differing requirements, the overall number of required hours may increase to over 150 credit hours.

While the proposed standard allows integration, the reality is problematic. Topics like ethics are discussed in many courses. Research skills are developed in most courses. Putting a semester-hour equivalent on the amount of discussion or the use of skills, especially when it is truly integrated, is totally arbitrary. This will add to the problems of the state boards in determining whether a particular course of study meets these highly specific requirements.

The 150-hour rule was perceived as adding to the difficulty and cost of obtaining certification. When it was instituted, the number of accounting majors dropped. Additionally, there was a perceived decrease in the quality of the majors.

The number of students majoring in accounting has just now recovered from the blow delivered by the 150-hour rule. However, the recovery in majors was not accompanied by a similar increase in numbers of students sitting for the CPA Exam. My fear is that the number and quality of students entering into accounting will decrease, along with the portion of students going into public accounting at a time when we need to increase the number of new professionals.

NASBA has the power to test outcomes, rather than to mandate inputs. The item of greatest concern to the public is the outcome, the number of qualified CPAs, not the inputs.

Required inputs can be a very inefficient use of resources.

The requirements have to be met whether actually needed by that group or not. Testing outcomes is efficient. It determines whether the desired characteristic is present, rather than whether the exposure to the input was present.

The motto of regulators should mirror the Hippocratic Oath - First, do no harm. We are facing a huge demand for accountants. This proposed change in the education requirements will, at a minimum, raise the perceived bar to the profession. Many students who would be great accountants will go into other professions.

What you can do

The best approach to dealing with the proposed changes to the UAA is to stop them from being adopted by NASBA. As an interested party, there are two groups that you can lobby to help attain this result: NASBA and your state board of accountancy. NASBA's discussion period ends on June 30. They invite comments to the NASBA Education Committee. They can be reached by mail at: NASBA Education Committee, c/o NASBA, 150 Fourth Avenue North, Suite 700, Nashville, Tenn., 37219. They can be faxed at (615) 846-0149. You can e-mail them at

The NASBA Web site also contains links to each of the state boards of accounting.

I strongly urge each of you to contact both NASBA and your state board of public accounting and express your concerns regarding the proposed amendments to the UAA.

Richard G. File, Ph.D., is the Union Pacific Professor of Accounting and chairman of the Accounting Department at the University of Nebraska at Omaha.

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